2009 was the start of the global period of an economic contraction where we see multi national corporations take on a slump, abatement, bust, decline, depression, diminution, lull, pause, retreat, withdrawal, bankruptcy, collapse in their financial standings!

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Feb 10, 2009

President Barack Obama's administration placed an eye-watering $2.3 trillion price tag on its plan to bail out the US banking system yesterday, opening up what it called a second front in the battle to pull the country out of recession.

As the $800bn economic stimulus plan finally passed the Senate, attention began shifting to the even bigger problem of fixing a financial system that has been on government life support since September.

Tim Geithner, the US Treasury secretary, said expansion of the unpopular Wall Street bailout plan is necessary because the government has for too long been "behind the curve, always chasing the escalating crisis". But expansion of the scheme, first launched by George Bush, threatens to unleash new political controversy. Critics say the new plan is short on detail, leaving some of the most important and vexing issues unresolved.

Mr Geithner called the expansion "comprehensive and forceful", but stock markets tumbled as investors derided the lack of detail.

The administration has pledged the revised financial stability plan will come with tough rules on what banks can do with government money.

This comes in response to public fury over continuing bonuses and perks being enjoyed on Wall Street, despite some $350bn of government money already having been given to ailing institutions. Under the new plan, instead of diverting cash into shareholder dividends or acquisitions, each bank will have to lend the fresh money to small businesses and consumers, who are bearing the brunt of the credit crunch.

There will be much more transparency, too, Mr Geithner promised. "Our challenge is much greater today because the American people have lost faith in the leaders of our financial institutions, and are sceptical that their government has used taxpayers' money in ways that will benefit them," he said. But he echoed Mr Obama's warning during Monday's televised press conference that rescuing the banking system is central to restoring health to the US economy: "Instead of catalysing recovery, the financial system is working against recovery," said the Treasury Secretary. "The battle for recovery must be fought on two fronts. We have to both jumpstart job creation and private investment, and we must get credit flowing again to businesses and families."

The new plan aims to balance aid for Wall Street with support, too, for main street. In particular, there will be $50bn set aside to bring down mortgage payments for borrowers struggling to avoid foreclosure. However, the bulk of assistance will be targeted at banks, which will undergo a "stress test" to see if they need government funds. And there will be a $1trn "public-private investment fund" that will buy toxic assets from the banks, finally freeing them up to start lending again. However, despite stoking anticipation on Wall Street, Mr Geithner said only that he was "examining a range of different structures" – comments which sent the US stock market down almost 4 per cent.

In addition, there will be extraordinary new efforts to get the credit markets moving, even without the help of moribund banks. The Federal Reserve will flood the system with $1trn in new loans to investors who want to help finance business and consumer lending.

Mr Obama used his televised press conference on Monday night to pile still more pressure on Congress to pass his economic stimulus plan, which aims to create jobs through about $800bn in Government spending and tax cuts. Yesterday he went to Fort Myers in Florida, where the jobless total has tripled in two years, to telegraph back to Washington the pain being felt in parts of the country. "We can't afford to posture and bicker," he said. Senate Democrats passed an $838bn stimulus bill with the help of three Republicans, but its menu of tax and spending measures differs significantly from a Democrats-only plan passed by the House of Representatives last month. Marrying the two could be politically volatile, although the White House says it still expects a final compromise plan to reach the President by 16 February.

In contrast to the stimulus bill, the new Wall Street rescue plan unveiled yesterday is not likely to require significant legislation by Congress. Later, Mr Geithner warned Congress it might have to approve significant additional funds on top of the original bill.

Last October, it voted to allocate $700bn to bail out the banks, half of which has been spent. The government money eventually spent on the new plan will be significantly less the $2.3trn headline cost, because much of the money is only being loaned, and the assets purchased might turn a profit. While working on the details of the latest rescue, Mr Geithner said that he would step up efforts to reach international agreements that could prevent a similar crisis. Finance ministers from the G20 industrialised nations will meet in Italy this weekend and discuss regulatory reform.

Obama's proposals

Reduce home repossessions: $50bn

Why is this important?

The giant hole at the centre of the banking system opened when US house prices began to fall, wiping trillions of dollars from the value of collateral held by banks – and it is widening still. As repossessed homes flood the market, it remains in freefall and is causing untold human misery.

What is the plan?

To encourage mortgage lenders to lower repayments or even the size of the debt. There will be a variety of incentives for lenders, including government compensation and possibly protection from lawsuits filed by investors.

Unanswered questions

The details will be announced in the next few weeks. It is unclear whether the sums involved will be enough to make a real dent in the rate of foreclosures, and reducing the supply of repossessed homes is only part of the problem. As the recession gathers pace, demand from nervous buyers has also slumped.

More money for banks: $300bn

Why is this important?

Until the giant hole at the centre of the financial system is plugged, the banks' lending activity will remain at a sluggish pace, and that means businesses, homeowners, car buyers, college students and property developers will continue to have trouble finding loans. Those loans are the life-blood of economic activity, and their absence is compounding the recession.

What is the plan?

Major banks will face a "stress test" to judge how much capital they need, not just to stay solvent through the recession but to increase their lending again. If banks need taxpayers' money, they will have to pay punitive interest rates, give the Government a stake in their company and accept transparency rules to shame them into cutting executive pay and perks.

Unanswered questions

All depends on the assumptions that go into the "stress test". If the economy worsens, the administration may need to ask Congress for more than the $300bn that remains in the kitty. The government could end up effectively owning the biggest banks in the US, and private investors are unlikely to advance their own capital to banks under those circumstances.

Dealing with toxic loans: $500bn to $1trn

Why is this important?

Banks are still sitting on trillions of dollars of soured mortgage investments and other bad loans, whose value depends entirely on how bad the economy gets. Because there is no clarity, there is paralysis. Banks have wrestled for more than a year with ways to rid themselves of these toxic assets.

What is the plan?

Using tax dollars, loans from the Federal Reserve and private money, the Treasury plans a "public-private investment fund" to buy toxic assets. It will grow over time and use expertise from private companies to set a value for the assets.

Unanswered questions

There is still no answer to the pivotal question of how much to pay banks for their toxic assets. If the price is low, several lenders could be forced to write down the value of their assets to a point that makes them insolvent. But private investors hardly want to pay over the odds – and neither should taxpayers.

Kick-start credit markets: $1trn

Why is this important?

The loans that businesses and consumers rely on do not all come from the banking system. About 40 per cent are financed by hedge funds and other investors, who buy parcels of these loans in the secondary market. That market has all but dried up, which is making loans even harder to come by.

What is the plan?

The US Treasury and Federal Reserve already have a $200bn lending programme aimed at kick-starting these markets, but this will be vastly increased in size. Investors will be lent money to buy parcels of credit card loans, student and small business loans, and now commercial mortgages as well, to prevent a collapse in the property market.

Unanswered questions

The appetite of worried investors for re-entering the embattled American credit markets is still to be tested, because the existing programme is still in its infancy. No matter how much financing becomes is available, there could be resistance to making new loans if the US economy is still heading downwards.

Asia will have a less acute impact from the global financial and economic crisis but their recovery will also be slower than Western countries, said Morgan Stanley (Asia) chairman Dr Stephen Roach.

He said Asia’s economies, which were largely export-led, would only recover after their main export markets, the US and Europe, recovered.

“Export-led regions are followers, not leaders,” he said. “The only possibility (to recover earlier) is China, as it has large infrastructure spending in place that could provide support for economic growth.”

Roach has predicted that China will recover by the second half of this year.

He said Asia would grow below market projections this year, forecasting Asian growth at less than 2.5% and the rest of the world at between -1% and 1.5%.

Asked if China could turn its high savings into consumption, he said unless China extended its safety net for employment and social security, consumption in China would remain deficient.

Roach also said he doubted that the use of monetary policy to boost the economy could be as effective as before.

“One of the consequences of lowering interest rates is high inflation. But my utmost concern is what the exit strategy for this aggressive easing is? How do you wind down without tipping to deflation,” he said, citing the example of Japan, where the economy had not been stimulated even with near zero interest rates.

Roach said he preferred fiscal policies, especially those which focused more on investments rather than private consumption, as he felt businesses were better credit managers than individuals.

On the US financial crisis, Roach said he blamed it on the reckless consumption, politicians and the central bank.

He said the US was only 20% through its deleveraging cycle and that the adjustments being made would take a number of years to complete.

On the US dollar, Roach said the greenback would continue as the world currency for a lot longer than many people thought, probably for a further 20 to 30 years.

General Motors Corp, staying afloat with $13.4 billion in federal rescue loans, announced early today that it is cutting its worldwide salaried workforce by 10,000, or 14%, this year and temporarily reducing the pay for a majority of its U.S. white-collar workforce.

"These difficult actions are necessitated by a severe drop in vehicle sales worldwide and by the need to restructure GM for long term viability," the company said in a statement.GM Chief Executive Rick Wagoner, who was meeting with congressional leaders in Washington about global warming legislation, said the announcement is “indicative of the kind of things we need to do to get this viability plan in shape and respond to these tough market conditions.”

The Detroit automaker is racing to put together a long-term viability plan to present to the government Feb. 17. It has said it needs to cut its U.S. salaried and hourly workforce by as much as 31,500 people through 2012.

“The announcement this week begins implementation of this aspect of the plan,” the company said.

In the U.S., GM's salaried workforce of 29,500 will be cut by about 3,400, or 12%, by May 1.

In a statement, GM said the job cuts “will be made using GM separation programs and policies which provide for severance payments, benefit contributions and outplacement assistance.”

The company also said executive employees in the United States will have their base pay cut by 10% and "many other" salaried employees will see reductions ranging from 3% to 7%. The U.S. pay reductions will also go into effect May 1 and will be in effect through the end of the year.

One 20-year GM employee said he heard the news on the radio this morning but had the day off, so he hadn’t had time to talk to coworkers yet. Anxiety, he said, was already running high before the announcement.

“Frankly, I am still trying to take it all in,” said the employee, who did not want to be identified.

“Everybody is worried and they are concerned,” he said. “It’s really been a situation where you don’t know what’s going to happen. And you are kind of waiting for whatever the next shoe is to drop.”

The employee, who works at the GM Technical Center in Warren, said his wife works for an automotive parts supplier and her job is also at risk.

“When you look at the economy in general, you know its not just General Motors,” he said. “If it was just General Motors, you could look someplace else for a job.”

Dustin Suppes, 29, of Novi, said, "I had heard rumblings and I figured it would be sooner rather than later because the viability plan is due the 17th and we're getting pretty close to that."

A white-collar worker at Delphi Corp., which is GM’s largest supplier and has been struggling to emerge from bankruptcy, said today’s news out of GM only further sank the mood at Delphi. He did not want to be identified for fears of repercussions in the current environment.

“Are people on suicide watch? No,” he said. “But they are trying to survive. The news is coming out faster and faster, so people are more apprehensive every day and every week.”

Workers there are also concerned, he said, that Delphi will implement pay cuts similar to the ones GM announced.

“I wouldn’t be surprised to see Delphi, Visteon and others follow suit,” he said.

The job cuts announced at GM follow a slew of job cuts announced at major employers nationwide over the past few months. About 600,000 jobs were lost in January, bringing U.S. unemployment to 7.6%. The number of unemployed Americans now stands at 11.6 million.

GM salaried retiree Gerald Patrick, 69, of Shelby Township said he thinks the news about the additional GM job cuts comes at a terrible time.

“For every good-paying automotive job that's lost, I think you have six to 10 other people affected,” he said. “It's a big snowball, and it just keeps gathering people and jobs and getting bigger and bigger. … It’s getting bigger and getting faster.”

Patrick said somebody needs to step in to stop the job losses from getting any worse.

“We need to do what we can to protect these jobs,” he said. “Something has got to be done.”

Royal Bank of Scotland (RBS) has said it will cut up to 2,300 jobs as it restructures the business.

The jobs will be lost from its back office operations across the UK.

RBS said it hoped to keep compulsory redundancies "to a minimum", and said that there would be no cuts among its customer facing staff.

The bank needed a government bail-out last year. In exchange for £20bn of public funds, the government now has a stake of almost 70% in the lender.

The cuts represent about 2% of RBS's UK workforce of 106,000 employees.

RBS UK chief executive Alan Dickinson said he recognised "that any news of this nature is unwelcome at any time".

"It is essential, however, that we consistently review our business to ensure that we are able to operate as efficiently as possible, especially in the current economic circumstances," he added.

RBS shares closed down 4%.

Bonus row

RBS announced 3,000 job cuts in October, and recently said that it expected to make an annual loss of between £7bn and £8bn for 2008.

It is also set to write down the value of assets, largely related to its takeover of ABN Amro in 2007, by up to £20bn.

Former RBS chief executive Sir Fred Goodwin told MPs on Tuesday that he "could not be more sorry" for what had happened to the bank.

Speaking before the Treasury Committee, he added that the bonus culture across the whole banking sector needed to be reviewed.

Sir Fred and RBS's former chairman Sir Tom McKillop both resigned from the bank in October of last year.

Sir Tom admitted to MPs that his bank's much-criticised purchase of Dutch rival ABN Amro had been a "big mistake".

Chancellor Alistair Darling has also entered the recent row over banking bonuses, saying on Sunday that RBS should not reward its staff with excessive bonuses.

"I have spoken to the chief executive of RBS, and made it quite clear - and he agrees - that no-one associated with these huge losses should be allowed to walk away with large cash bonuses," said Mr Darling.

Swiss bank UBS on Tuesday posted an annual loss of 17 billion dollars (13 billion euros) in 2008, the largest in Swiss corporate history, and announced 2,000 new job cuts.

Full year loss in 2008 reached 19.697 billion Swiss francs, including 8.1 billion francs worth of losses incurred during the last three months of the year, UBS said in a statement.

Switzerland's biggest bank, which is one of the worst-hit globally by the United States subprime home-loan crisis and the ensuing market fallout, said more jobs would go this year at its investment bank unit, which was responsible for most of the damage.

Despite the figures, the bank said that it would still pay employees bonuses totalling 2.15 billion francs.

Just under half of the sum are bonuses that the company is obliged to pay contractually, while the remaining 1.161 billion francs make up variable bonuses determined by management.

The group's board said it would forego bonuses for 2008.

Chief executive Marcel Rohner reiterated a projection made earlier that UBS would be profitable in 2009 after posting its second consecutive full-year loss.

He said the bank has had "an encouraging start" this year, with positive inflows of assets at its wealth management and asset management units.

"We have had positive net new money in January and an encouraging start into the year. That also refers to trading in (our) investment bank," chief executive officer Marcel Rohner told journalists during a conference call.

The news gave a temporary bounce to the stock, which gained sharply in opening trade before falling back.

At 0812 GMT, it was trading 6.74 percent higher at 13.77 francs, outperforming the overall Swiss Market Index which was up 0.53 percent. By 0837 GMT, however, the stock was up 1.6 percent to 13.11 francs, while the SMI was trading flat.

Stemming a haemorrhage of assets has been a key concern at the bank, after clients withdrew a net 83.6 billion francs worth of assets in the third quarter and 85.8 billion worth in the last three months of the year.

"Overall net new money outflows were particularly heavy in October, but slowed down progressively in November and December," said the bank.

However, the bank warned that it remained "cautious" and that it would continue to cut costs and risks.

It announced another 2,000 job cuts in its investment banking unit on Tuesday, bringing the total job losses since October 2007 to 11,000.

"Financial market conditions remain fragile as company and household cash flows continue to deteriorate. On the other hand, governments are taking very substantial measures to ease fiscal and monetary conditions," the bank noted.

"Our near-term outlook remains cautious, and UBS will continue its programme to strengthen its financial position through reductions in risk positions, risk weighted assets, total assets and operating costs," it added.

An icon of Swiss banking, UBS has experienced two very turbulent years, with billions in asset writedowns and losses that forced it to take on an emergency state aid package worth almost 60 billion dollars late last year.

A government grant of $9.4 billion hasn't helped General Motors, one of the nation's Big Three automakers, retain its workforce.

GM today announced it will cut 10,000 jobs in May and continue global layoffs through the year. Mid-level salaries will be decreased 3 to 7 percent and executives will take 10 percent pay cuts. With a severe drop in car sales and the need for restructuring, GM joins a list of companies letting go of employees to keep their businesses afloat.

GM has received $9.4 billion in federal assistance and expects to get $4 billion more this month. In the past few months, GM has been under scrutiny after appealing for and receiving a $13.4 billion bailout. The company, along with Ford, was forced to sell its jet fleet as CEO Rick Wagoner arrived in Washington in November on a private plane while pleading for taxpayer money. All three automaker CEOs flew in corporate jets to Capitol Hill.

Despite the claims of scaling back, the company also recently showed up at the Super Bowl as a corporate NFL sponsor, continuing to offer the newest Cadillac to the MVP and providing courtesy vehicles for VIPs.

GM has already cut back on benefits and payroll of salaried workers since November. The company is still in talks with the United Auto Workers union about worker buyouts in an attempt to decrease outstanding debt. The news of job cuts comes the day after GM vice chairman Robert Lutz announced his retirement. Lutz will be replaced by Thomas Stephens, GM's executive vice president of global powertrain and quality division, at the end of the year.

With more than 30 years of experience, Lutz claims that GM will pull through the recession under the automaker's viability plan to be submitted to Congress Feb. 17. The proposal will undoubtedly downsize the automaker, despite the federal financial assistance.

While he was not present at the congressional bailout hearings, Lutz's uncanny response to the increasing criticism of GM CEO Rick Wagoner was clear in a New York Times interview: "This is the equivalent of the Incan or Mayan days when everybody would go to the top of the volcano and throw a virgin in."

Lutz is well-known in the media for his outspoken remarks and in the industry as a larger-than-life revolutionary executive. He has worked for all three of the nation's major automakers, starting at GM in 1963 and returning in 2001 under the hire of Wagoner.

Nissan Motor on Monday joined its Japanese carmaking rivals in forecasting a big loss for the current financial year, and said it would eliminate 20,000 jobs, in one of the most aggressive cuts announced by any Japanese company since the start of the global downturn.

The development reflects the growing urgency felt by Japanese manufacturers across the board as it becomes clear that the slowdown, combined with the persistent strength of the yen, is hitting more severely than thought.

"In every planning scenario we built, our worst assumptions on the state of the global economy have been met or exceeded, with the continuing grip on credit and declining consumer confidence being the most damaging factors," the Nissan chief executive, Carlos Ghosn, said in a statement accompanying Nissan's earnings release for the three months ended Dec. 31.

This will be the first annual net loss since Ghosn took the helm at Nissan a decade ago.

The entire industry is in turmoil. Toyota Motor, Mazda Motor and Mitsubishi Motors all recently announced they would post losses.

In the United States, the government is bailing out two of the country's largest automakers, General Motors and Chrysler. France on Monday announced a €6 billion, or $7.8 billion, loan plan to support its car industry.

"In 1999, we were alone. In 2009, everybody is suffering," Ghosn said Monday, according to The Associated Press.

Nissan said it now expected a net loss of ¥265 billion, or $2.9 billion, for the business year ending March 31. It had previously projected a ¥160 billion profit for the year.

The profit warning coincided with data released Monday showing that corporate bankruptcies in Japan rose 16 percent in January to the highest level in six years. Also, Japanese machinery orders declined for a third consecutive month in December.

"There has been a phenomenal decline in output in Japan, and it looks like the first quarter of this year will be even worse than the last quarter of 2008," said Hiroshi Shiraishi, an economist in Tokyo for BNP Paribas.

"Demand for capital goods remains in free fall."

Company financial releases over the past two weeks have shown that the drop-off in demand was much worse than feared, leading nearly all of the best-known Japanese companies - Toyota, Sony, NEC, Hitachi and Panasonic among them - to warn of major losses for the business year ending March 31 and begin a wave of layoffs in an attempt to preserve cash.

Honda Motor and Nintendo, the maker of the popular Wii game console, are among the few major companies to still expect a full-year profit, but they, too, have had to severely scale back their earnings expectations.

Nissan revised its forecast after a grim set of earnings for the last three months of 2008, as the economic slowdown and credit crunch caused its global car sales to slump 18.6 percent, to 731,000 units.

Nissan lost ¥83.2 billion from October through December - a major reversal from the net profit of ¥132.3 billion a year earlier.

With cars piling up unsold around the world, manufacturers have rushed to cut production and costs. Nissan on Monday announced that it would reduce output to 787,000 units by March 31 - down 20 percent from its original production plan. It is also reducing capital spending, scrapping bonuses for directors and eliminating 20,000 jobs in its 235,000-person work force; 12,000 of the job cuts will be in Japan.

Nissan's layoffs are the third major job-cut announcement in Japan since Jan. 30. In that period the electronics makers NEC and Panasonic announced layoffs totaling 35,000.

The downturn in demand for discretionary goods like cars has hurt manufacturers around the world.

More bad news in the form of financial results has surfaced today, this time from Sega and its results for the first three quarters of its 2009 fiscal year. This period, which ran through December 31, 2008, saw a total loss of 10.8 billion yen or $119 million USD, reports GamesIndustry.biz. It may not be as significant of a loss as the previous year's staggering $173 million loss during the same period, but needless to say, this isn't good news.

Following up on the news is word from Kotaku that Sega is poised to either close or sell 100 arcade centers in Japan, reduce research and development by 20%, and layoff 560 of the company's 3,100 employees. Layoffs are apparently in a voluntary phase currently, with those who surrender their jobs willingly to be let go next month. Things aren't looking up in the fourth quarter, either, as Sega is expecting the full fiscal year's losses to exceed $235 million.

The layoffs will hopefully be sufficient in getting Sega back on track of profitability. One thing for sure to come out of this is that, as sweet as they are, you can kiss those dreams of a Dreamcast 2 goodbye.

At a time when U.S. employers are laying off workers in record numbers, Intel Corp. (INTC) announced yesterday (Tuesday) that it would spend $7 billion over the next two years to build advanced manufacturing facilities while safeguarding 7,000 high-wage jobs.

To support the deployment of Intel’s cutting-edge 32-nanometer (nm) manufacturing technology, Intel President and Chief Executive Officer Paul Otellini said the company will upgrade four existing manufacturing sites in Oregon, Arizona and New Mexico to build faster, smaller chips that consume less energy.

The new funding represents the world’s biggest chipmaker’s largest-ever investment for a new manufacturing process and furthers its efforts to distance itself from its would-be rivals.

“We’re investing in America to keep Intel and our nation at the forefront of innovation

Mr. Otellini’s speech emphasised that Intel was intent on making major investments when most other companies were being forced to scale back.

Boldness is in Intel’s DNA, as the company is known for its strategy of investing during downturns to give it leverage when economies emerge from recession. Since 2002 it has invested $50 billion in capital and research and development in the United States, where it maintains 75% of its production capacity.

Intel’s latest high-performance technology - code-named “Westmere” - will be used in building chip circuitry 32 billionths of a meter across. The tiny, atomic level structures will be 71% smaller than Intel’s current generation of 45 nanometer processors. The chips will also incorporate additional graphics capabilities.

The move could help Intel grab more market share from rival Advanced Micro Devices Inc. (AMD). Intel had 82% of the market for x86 processors - the ones found in most servers, desktop computers and notebooks - in the fourth quarter of 2008, up from 76% a year earlier, according to Mercury Research. It will also help Intel’s efforts to penetrate other markets such as embedded devices and cell phones.

For its part, AMD won’t shift to 32-nanometer technology until the end of 2010, with volume production beginning in 2011. Although other chip makers like IBM (IBM), Samsung Electronics Company Ltd., Chartered Semiconductor Manufacturing Ltd.(ADR: CHRT ), are sharing 32-nanometer chip technology and could ramp up production as early as the second half of this year, none of them can challenge Intel for control of the PC processor market.

The move continues Intel’s march to the relentless beat of Moore’s Law, which says integrated computer circuits would double in performance every 24 months, coined by co-founder, Gordon Moore in 1965.

Intel has kept its founder’s legacy intact, setting the pace by building the fastest and smallest chips since the integrated circuit board was invented in 1958.

That provides a powerful advantage to the company, as tech-savvy consumers keep buying new generations of chips to run the latest gaming and other power munching software coming to the market.

“Each time we make this kind of transition people go ‘Big deal, I don’t need more power,’” semiconductor industry analyst Nathan Brookwood told Forbes. “But two years later if you try to take away their newer, faster machines you’ll have to pry it out of their cold, dead hands.”

Duncan cited a continued decline in consumer spending and overall industrial production as putting unprecedented pressures on the trucking industry.

“It’s the worst I have seen in my 30-plus years in this business,” Duncan said in a statement. “The outstanding value proposition and customer service that our team delivers every day is still growing significant market share, but not sufficiently to counter deep declines in our base customer volumes.”

The company has a FedEx Freight location in Schertz, according to its Web site.

A company spokesman said it was too early to know if any local employees would be affected.

FedEx said the company will offer an option for affected employees to transfer to other positions or the employees could be recalled if conditions improve in the next three months. FedEx will offer severance packages to affected employees and maintain health benefits for 30 days.

Feb 6, 2009

The nation’s retailers said they suffered a fourth consecutive month of steep sales declines in January, underscoring a broad and sustained shutdown in consumer spending.

“For the last 10 years people bought cars and refrigerators and TVs like they were going grocery shopping,” said Mike Moriarty, partner at A. T. Kearney, a management consulting service. “Now people are grocery shopping like they’re buying a car.”

Sales for the entire retail industry fell 1.6 percent last month compared with the same month a year ago, the International Council of Shopping Centers, an industry group, said Thursday. The research firm Retail Metrics put the industry decline at 1.8 percent and said that without Wal-Mart Stores, the nation’s largest retailer, sales would have fallen 5.6 percent.

January is always a slow period for stores, but nowadays big-box retailers and luxury chains are contending with paltry sales trends and profit margins that have been hurt by excessive discounting to attract consumers. Stores with weak balance sheets “are not going to make it through the summer,” said Claire Gruppo, managing director of Gruppo, Levey & Company, a New York investment bank.

On Thursday, Fortunoff, the nearly 90-year-old upscale home furnishings and jewelry chain, became the latest retailer to file for Chapter 11 bankruptcy protection.

Several chains that reported sales figures on Thursday beat low expectations, but most still turned in double-digit declines. Analysts were not surprised. As they had expected, the most successful stores were the ones selling quality and name-brand essentials at low prices.

“When there’s a need for product, whether that’s food, consumables, kid’s apparel — nondiscretionary items at a value and at a convenience — then the consumer is shopping,” said Matthew F. Katz, a managing director in the retailing practice of AlixPartners, a reorganization firm.

Wal-Mart, for instance, exceeded expectations. The retailer posted a 2.1 percent increase, not including fuel, at stores open at least a year, a barometer of retail health known as same-store sales.

“Our sales results were driven by a continuation of gains in customer traffic,” said Eduardo Castro-Wright, vice chairman of Wal-Mart.

Wal-Mart also said it would no longer offer monthly sales forecasts. Instead, it will offer guidance four times a year.

“We believe this guidance is a more appropriate measure for our investors,” said Tom Schoewe, Wal-Mart’s chief financial officer, “particularly in volatile times when consumer swings are more difficult to predict. This is more consistent with the long-term view we take on our business.”

Wal-Mart’s discount competitors also fared better than the rest of the industry. Sales at BJ’s Wholesale Club were up 7.6 percent, not including fuel, this January compared with last January. Sales were down 3.3 percent at Target and 2 percent at Costco but those figures were an improvement over the chains’ December sales figures.

Aéropostale, the affordable apparel retailer that has been on a roll lately, had an 11 percent sales increase in January. Another specialty retailer for teenagers, Buckle, had a 14.7 percent jump. Sales at Hot Topic, another mall chain store aimed at teenagers, were up 6 percent, mainly from selling gear inspired by the vampire romance film “Twilight.”

Still, the American consumer — grappling with rising unemployment, tight credit markets and falling stock portfolios — is not spending freely. The savings rate rose to 3.6 percent in December, up from 2.8 percent in November, after years in negative territory.

To stay alive, retailers are consolidating their operations, eliminating jobs and closing stores.

Last month, Fortunoff closed its Fifth Avenue store in Manhattan.

“The jewelry and home goods businesses have been hit particularly hard by the economic downturn,” Charles Chinni, Fortunoff’s president and chief executive, said in a statement on Thursday. “However, we are actively seeking a buyer for the business, and we will continue to do so in the Chapter 11 process.”

Fortunoff had already sought bankruptcy protection last year but was bought in March for $110 million (including $80 million in cash) by NRDC Equity Partners, the private equity firm that owns the Lord & Taylor department store chain.

NRDC had planned to put Fortunoff goods into every Lord & Taylor store and expand the number of Fortunoff’s regional outdoor furniture stores from 16 to more than 300. But that plan has been scrapped. Private equity firms, like everyone else, are hunkering down and spending as little as possible these days.

“What we all want to know is, ‘How long does this go on?’ ” asked Marie Driscoll, a retailing analyst with Standard & Poor’s Equity Research.

The International Council of Shopping Centers, the trade group, said sales for the retail industry would continue to decline, falling 1 to 2 percent in February. And the National Retail Federation, an industry group, sent a letter to the Senate, calling for national sales tax holidays.

The federation said in its letter that it was “extremely concerned” that the package of economic stimulus measures passed by the House last week was not enough to jump-start consumer spending.

Ford, the US car giant, today announced that it was cutting 850 British jobs as new vehicle registrations plunged by 30.9 per cent, confirming the dire state of the transport market.

Ford said today that the job cuts were in response to the “serious economic situation”, and plans to reduce staff by between 400 and 500 at its Transit van plant in Southampton. A further 350 jobs will be lost across the company.

The company is the lastest carmaker to announce job cuts after sales of new vehicles have plunged as consumers cut back on spending while the price of materials, such as steel, has soared.

Last month, Honda put its British workers on an enforced four-month layoff while Nissan cut 1,200 staff at its Sunderland plant, Jaguar Land Rover reduced staff by 450 jobs.

Today, the Society of Motor Traders and Manufacturers (SMTM) said that new car registrations fell by 30.9 per cent on the year in January to 112,087.

Last month, the Government pledged to guarantee up to £2.3 billion of loans to the car industry to help it weather a slump in demand. However, the SMTM said today: “There is a clear need to stimulate demand for new vehicles in the UK market."

Private car sales fell by 27 per cent in January as consumers continue to rein in their spending, fuelling fears that the downturn could worsen. Howard Archer, of IHS Global Insight, the economic consultancy, said: "Sharply deteriorating car sales provide further clear evidence that consumers are very reluctant to spend, particularly on major costly items. This reinforces belief that consumers are likely to cut back markedly on their spending this year."

Purchases of fleet cars by companies dropped by 35 per cent in a further sigh that businesses are also cutting back investment sharply.

Royal Mail plans to cut 16,000 jobs in a move that would unleash further industrial unrest on the battered economy.

The proposed losses — amounting to almost one in ten of the company’s workforce in a drive to reduce the wage bill by £470 million — come as unions also prepare to fight the introduction of a commercial partner to the business.

David Ward, deputy leader of the Communications Workers Union, attacked what he called panic measures. “We are not opposed to modernisation but these are random savings which have not been properly worked out,” he said.

Royal Mail, which employs 170,000 people, has contacted regions around the country asking about interest in redundancy, part-time working and other cost-saving moves.

The Mirror newspaper reported that internal Royal Mail documents stated: “All teams have been given a 10 per cent cash reduction target and so we need to focus not only on where we can deliver an excellent service with fewer roles but also opportunities to spend less cash.”

Further jobs will be at risk later if recommendations by Richard Hooper, a former deputy chairman of Ofcom, are implemented. He has called for a private investor to be allowed to take a stake in the state-owned company and to close half of its 71 mail centres. Unions have warned that the move could result in up to 50,000 job losses.

The CWU is considering severing links with the Labour Party over the plans.

The fresh threat of job losses comes despite record profits, announced last month, of £255 million for the nine months to December 31. This compares with £162 million for the financial year 2007-08. However, that year was hit by some of the worst industrial action for two decades.

The group, which has been criticised in Parliament for failing to modernise quickly enough, said that all its four main operations were in profit for the first time in 20 years. However, it did not provide a breakdown of profits between Royal Mail letters, the Post Office, Parcelforce and GLS, the European parcels business.

It forecast that annual profits would be twice those of the previous year but nevertheless warned that its volumes were falling by more than 7 per cent a year and that competitors continued to gain ground. It also said that the one-price-goes-anywhere universal service was under threat and was still making a loss.

The CWU wants an independent audit of Royal Mail’s finances, accusing it of a lack of transparency. Mr Ward said: “Royal Mail is again giving us mixed messages on its financial health. These results must not come at the cost of cutbacks in services, terms and conditions for staff and post office closures.”

Hundreds of Boston school teachers could be out of a job if the city school department follows through with a plan to make drastic budget cuts.

The district may slash 900 jobs, and more than 400 would be teaching positions. Several schools may also be closed.

Superintendent Carol Johnson announced her preliminary budget plan Wednesday night as hundreds of school students and their parents protested at the district's school committee meeting.

The cuts would affect the 2009-2010 school year and are aimed at closing a $107 million budget gap.

"There are two basic problems: we have reductions in our revenue and increases in our expenditures," Johnson said.

The protesters told the committee to try to find another way.

"We live in a society that pushes our children to thrive and fight and get a good education, yet every single year this society takes more and more away from our education," Boston Latin senior Mariel Jane Bastien said.

"Music is almost our last resort in our school. We've already had almost everything else stripped away from us," another student told the panel.

There was also frustration over the school programs that are also at risk. There was a move to convince the district's unionized teachers to take a one-year wage freeze to save jobs.

"The wage freeze would go a long way to solving the problem for over 400 staff, and over 330 of them are classroom teachers," Johnson said.

But the union did not seem receptive to the idea.

"We don't see this as a wage freeze issue. We don't see it as a spending issue. It's a revenue issue," said Boston Teachers Union President Richard Stutman.

"I ask all the other unions to have the courage to stand up and help us solve this problem," Boston Mayor Thomas Menino said.

There was also talk of restructuring the district to try to get control of escalating busing costs. The public will have a say in the first of a series of public hearings at Blackstone Elementary School in South Boston.

Meanwhile in Lynn, the teachers union is set to vote on whether or not to accept a furlough day in the fourth quarter of this fiscal year in a move that could save more than 100 jobs, the Lynn Daily Item reported.

Feb 5, 2009

Cisco CEO John Chambers, in pursuing another billion dollars of expense reduction, just said on the networking gear company’s earnings call that the company could reduce its work force by 1,500 to 2,000 people.

But he’s not considering a layoff, he said. A companywide layoff, by his definition, would constitute 10% of the work force, or 6,700 of the company’s worldwide workforce of 67,000 employees.

He says he hopes to avoid “large downsizing events.”

But over the next couple of months, the company hopes to wring out another $500 million of annual, ongoing expense.

Already, he said, the company has pushed its annual ongoing expenses down $1.5 billion, from what had been a $15 billion run rate.

A good example from the progenitor of video conferencing systems and services it calls Telepresence: Employee travel. Travel expenses have been driven down from $7,900 per employee per year to $3,400.

The cable company just announced its charging you more for service, and now comes word it will let more than a thousand employees go in a cost cutting move. The Syracuse area Time Warner spokesperson has "no comment" on any possible local losses.

Time Warner Cable Inc. says it is laying off 1,250 people over the next few weeks in the face of slowing growth at the nation's second largest cable operator.

The New York-based company expects to save $90 million a year from the job cuts.

The layoffs are in addition to the 500 jobs lost last year as the company restructured into six regions from about 24.

Earlier Wednesday, Time Warner Cable reported a net loss of $8.16 billion, or $8.36 cents per share, in the fourth quarter including a $14.82 billion charge to write-down the value of cable franchise rights and a loss of $13 million on the sale of cable systems.

THE new year has seen more than 1,000 people in Penang lose their jobs.

From the 1,313 people who lost their jobs in January, 522 were foreign workers.

These figures compare with the 3,332 people who were let go in 2008, Chief Minister Lim Guan Eng said yesterday.

Citing statistics released by the State Manpower Department, he said a total of 173 locals were part of a voluntary separation scheme (VSS) offered by four companies last year.

"In January this year, 17 locals participated in a VSS which was offered by one Penang-based firm," he told reporters at his office at Kompleks Tun Abdul Razak in Georgetown.

From the 3,332 people who lost their jobs last year, only 81 were foreigners.

Lim said the job losses in 2008 involved 129 firms, the bulk of them comprising local companies in the manufacturing sector.

"Thirty two employers in Penang have parted ways with their employees in January this year," he added.

Industry sources say that only 20 per cent of the 32 employers who either instituted the voluntary retrenchment exercises or let their workers go were made up of multinational corporations operating in the state.

Given the number of retrenched workers in Penang and the rest of the country, Lim stressed on the importance for the government to roll out the second economic stimulus package soon.

"The stimulus plan must be quickly released and the current amount of RM7 billion should be increased to RM50 billion," he added, saying that he will convey the state government's concerns on the economy to Second Finance Minister Tan Sri Nor Mohamed Yakcop when the two meet in Putrajaya today.

Bloomberg LP will cut 100 television and radio jobs in the first layoffs since it was founded in 1981 by now-New York Mayor Michael Bloomberg.

The news and financial data provider will cut the jobs in the United States, 45 of them from its newsroom staff, spokeswoman Judith Czelusniak said, adding that Bloomberg might cut other jobs in Britain, Europe and Japan.

"It is a restructuring really needed in order to make programming changes and a network that really leverages our global bureau system and infrastructure," Czelusniak said.

Multimedia operations, which include broadcast, are overseen by former NBC television executive Andrew Lack. Lack took over last year from Matt Winkler, who founded Bloomberg's news operation and still heads the news group.

The Los Angeles Times reported the job cuts on its website on Tuesday evening. They come shortly after the departure of Bloomberg Television Managing Editor John Meehan.

The cuts include canceling the "Night Talk" TV show with host Mike Schneider.

The New York Post reported on Wednesday that Bloomberg's TV and radio operations both are losing an estimated $20 million a year. Czelusniak declined to comment on that report.

Czelusniak confirmed that Bloomberg generates about $6 billion in annual revenue, a figure cited by the Los Angeles Times.

The company, which competes with Thomson Reuters Corp (TRI.TO) (TRIL.L), employs about 10,500 people worldwide, with more than 6,500 in the United States.

It employs more than 2,300 news staff, including 1,500 print reporters and about 850 workers in multimedia. It is adding about 70 print news jobs, Czelusniak said.

Bloomberg has avoided cutting jobs, even at times when other media outlets have.

Like other financial media, Bloomberg is trying to deal with thousands of job cuts at banks and other institutions where it sells its news and data.

Czelusniak said the company plans to hire about 1,000 people this year, but net additions will be lower because of the planned job cuts.